There is at least one high probability event that may materialize out of Friday's selling. The S&P trendline now represents strong resistance. Because of market psychology there is now only a very small probability of going back up directly through the trendline. So that if the market were to retrace to near the trendline any time soon a superb high probability shorting opportunity would result.
I have noticed in the past that whenever I thought I had a sweet breakout setup that the breakout seemed to break down and fail soon after. One notable stock that I was certain would breakout was DRYS. The rising Baltic Dry and consolidation pattern seemed to make the trade behind it solid. I believe the breaking of a trendline does not matter. The success or failure of it will be the same as a coin flip. If and when price accelerates downward, we can all look back in hindsight and say the pattern worked wonders. However, if it fails, then we will look back and turn away from technical analysis saying that it didnt work. On CNBC, they had someone come on to tell us about the broken trendline. I am wondering if this is not a sign that the pattern will now fail. CNBC, blogsters and websites like this have worsened the odds behind the trendline and chart patterns. Patterns that once worked no longer seem to have that same mojo because of the likes of Jim Cramer and so many blogsters. Remember the COT reports? Those reports are now good for toilet reading as they are so widely used and now invalid.
time to crash n burn we are not going down too much as the printing press will not allow it the pundits are already saying the pumping has to go on for months to come. cant imagine an index prolonged decline, when dividend yield is at around 25bp and the cost of borrowing is next to zero.
mondays action reminded me of when the market topped in '07 on new highs, up big then mean reversal. we've seen sighs of major distrobution over the past month, after fomc , ect. keep in mind anybody buying last oct. cought the bottom in basic matirials, energy, infrostructure, tech, buying them at equity levels and now siting on long terms cap gains with 100-400% returns, i'd take profits. i dont think well have the same kind of selloff like we had last year, (funds selling because they had margin calls) but a consolidation and slow drift down into a period of higher marginal taxes and uncertain economic outcomes (sustainability) is probably likely. (The market is a pricing mechanism if you wait for data to confirm your theory, you will miss the easy money.)
Actually I did not have the weekly trendline breaking in July. I am one of those who believes how the trendline is drawn does matter and that there is is a best way. Please see my thread called "SPX trendline" in this same forum for copies of my charts. I do agree that breakouts have become less reliable, and nowadays there often seems to be a fakeout before the real breakout (or breakdown). I do want to add something I suppose is obvious to most of us and that is that a weekly trendline is more important than a daily, and a monthly even more important. Retailtrader's remarks are cogent and remind us that one should always be prepared to be wrong.
Im glad to see you are keeping the conversation going in this thread. If you do not get a lot of votes there are reasons. Most have to do with the limited choices. You apparently have a market bias and that precluded putting up a fill range of choices. For quite a while there has been some commentary (buzz) about what the market is doing. This market is a once in a lifetime experience unfolding. The most important thing a person can do it keep track of things once he is able to view the markets. My suggestion would be to set up your market viewing and then use it to keep records. For those that do, check out how the last short channel of the Bull retrace led to the last long channel (which failed to go to completion). Instead it lead to the Bull retrace BO of its RTL. Charts of this occurance have been posted by some of the more able chartists which post here. You probably do not regard the hierachy of nested fractals in any manner. That is your decision. Fractals that are nexted have a great deal of context information regarding markets. Since each fractal dictates what to happen in the next slower fractal, a context is always available from two adjacent bars all the wy up to the economic Bull or Bear market level. There are several levels between a Bull/bear economic level and the most common slowest fractal (channels) kept tract of by intraday commodities traders and position or swing oriented stock traders. The five pertinent levels are: Channels, Traverses, Tapes, and Building Blocks of Tapes (BBT's) , and sub building blocks. Recently we went through the last short channel followed by a long channel that faltered. This is a clue for you. It is typical of the CW pattern called an inverted saucer which is much like an head and shoulders (odd harmonic) or double top (even harmonic). This period is often referred to as "Repeated testing of R". What ever these patterns are called, they are now past. the market has passed the right Trend Line of the former Bull Retrace of the the depression we have been in since the end of June, 2006 (when the overlap of the former Bull market and this present Bear market began). You, like Pring and most other venders, are not aware of trend overlap and particularly when the period of overlap prevails. A whole set of nested fractals consists of 1 Channel, 3 Traverses, 9 tapes, 27 BBT's and 81 sub BBT's. At the finest level there is an order of events for adjacent bars which contribute to the formation of the nested fractals. There are about 9 cases for two adjacent bars in their P, V relationship. Each has a name and is recognized automatically. The current short channel we are in and which established that the Bull retrace was behind us started its final beginning on 26OCT09 on bar 20 of a five minute ES chart. The carry over for Monday 02NOV09 is a Short Channel; Short Traverse 1 (temp FTT@ pt 2 of BBT 3);Short Tape 3 (temp FTT@ pt 2 of BBT 3); BBT 3 pt 2 to pt 3; Sub 2 long pt 1 to pt2 after BO of Sub 1 RTL in flat top two bar pennant. Previously, on bar 5 of the Thursday, 29OCT09, the Traverse 1 and tape 3 and BBT 3 had completed and the long Traverse 2, Long tape 1, and BBT 1 long began. "Hope set in for those like you who are long biased and NOT neutral biased. Too bad for you. The long travrse completed quite neatly on bar 69 of Thursday. This ment the last traverse, Traverse 3 of the short channel was beginning. The short channel would rap up and a long channel outside of the completd Bull retrace would begin. This would be a several day respite for long biased traders. But that did not happen. emialed annotated charts on bar 8 when the "three move" news was completed. The move on the news were "long" biase" and THAT EVENT was going to be short ived since in Happened in a short BBT 1 which would then resume. Ending the short BBT 1 of the last short Traverse 3 turned out to have some spectacular sub BBT price, volume movements. Volume was EXCEEDING the inital beginning of the short channel and the news had loosened up the market volatility as some shorts gor cascaded out on the news and then some longs got cascaded out. Uniformed traders were closing their accounts in either direction. This is a precursor to panic traders and revenge traders who need (in their eyes) to make up losses. Read ET posts to see this (Dustin contributuers, especially). VE's on LTL's began at this point. So the sub BBT containers had to be accellerated in slope; the money velocity of trades was picking up. In this intrval there were SEVEN falled attempts for "long bots" to take control. On a late "settlement 14:10 one long dominated then capitulaed in a SIX bar run down. Why was the trading so great as the apfternoon passed? The long Traverse 2 was wiped out by the falling levels of the BBT 1 of the new short Traverse 3 AND THEN the VE's moved from tape to traverse level. Prive was breaking down through the whole fractal nes FOR THE FIRST TIME SINCE THE BO OF THE BULL RETRACE. There were THREE traverse VE's after "settlement". This means HF and MF's were going back to the trough to cover being upside down by more than their calculated risk paramenters you guys read and post so much about. If there is a volatility expansion big enough to wipe out long traverse, then technically we ARE BACK TO THE FIRST SHORT TRAVERSE of an ever steepening FIRST short channel AFTER a Bull Retrace failing. So there are a lot of events coming down the pike, depression wise. And the short channel is steepening AND it volatility EVEN BEFORE POINT 2 OF THE CHANNEL. We have arrived at a very profitable periiod in this depression for skilled neutrally biased expert traders. We get to see traders getting their accounts closed when cascading occurs. So the inverted saucer is now picking up steam. Your questionaire indicated you can't see the market on your screens. Secondly, you cant read the markets as a consequence. Thirdly, most edges that were working a week ago are done working for a few years. The market is going well below the March lows and it will happen quite soon. The prognosticators will be adding a new seasonal term to their punctuations: snowballing. Now that we can make 4 to 6 pionts in 5 to 15 minutes, there is a new ballgame in town. Your 'hope" experience has come to an end. Maybe Trader666 can rethink his views on my posts about the last short before the end of the Bull retrace. The consolidated 5 minute P, V chart I referred to for this post is 54 inches by 36 inches and on five nested fractal levels. My comments are gap adjusted.
Thank you for additional info, piezoe. I've been using a daily chart, and viewed the weekly chart only recently when Petsamo referenced it and it indeed indicated the top was very likely in.
The trendline is drawn "from the lowest low through the highest low that precedes a high without passing through any tails or bars in between". not the highest SWING low. The trendline was in fact broken in June, forming a swing low in July. One could also argue for a break in May, but the break in June is good enough.